More than 70 percent of US firms operating in southern China are considering delaying further investment there and moving some or all of their manufacturing to other nations as the trade spat bites into profits, a business survey showed yesterday.
US companies operating in China believe they are suffering more from the trade dispute more than firms from other nations, according to the poll by the American Chamber of Commerce in South China, which surveyed 219 companies, one-third from the manufacturing sector.
Sixty-four percent of the companies said they were considering relocating production lines to outside of China, but only 1 percent said they had any plans to establish manufacturing bases in North America.
“While more than 70 percent of the US companies are considering delaying or canceling investment in China, and relocation of some or all manufacturing out of China, only half of their Chinese counterparts share the same consideration,” the report said.
The trade spat is shifting both supply chains and industrial clusters, mostly toward Southeast Asia, the survey found.
US companies reported facing increased competition from rivals in Vietnam, Germany and Japan, while Chinese companies said they were facing growing competition from Vietnam, India, the US and South Korea.
Customers are slowing down orders or not placing them at all, American Chamber of Commerce in South China president Harley Seyedin said.
“It could very well be that people are holding back on placing orders until times are more certain or it could very well be that they are shifting to other competitors who are willing to offer cheaper products, even sometimes at a loss, in order to get market share,” Seyedin said. “One of the most difficult things about market share is once you lose it, it is very hard to get back.”
Firms in the wholesale and retail sectors have suffered the most from US tariffs, while agriculture-related businesses have been most hit by the Chinese measures, the survey found.
The survey was conducted between Sept. 21 and Oct. 10, shortly after the US imposed tariffs on another US$200 billion of Chinese goods. That prompted Beijing to retaliate with additional tariffs on US$60 billion of US products, escalating a tariff spat between the world’s two largest economies.
Nearly 80 percent of the respondents said the tariffs have knocked their businesses.
About 85 percent of US companies said they have suffered from the combined tariffs, compared with about 70 percent of their Chinese counterparts. Companies from other nations also reported similar impacts as their US counterparts.
The top concern of companies surveyed was the rising cost of goods sold, which resulted in reduced profits. Other concerns included difficulties managing procurement and reduced sales.
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